Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.

Twitter Management Talks Video, Daily Users, and More

Here are three must-see quotes from Twitter's fourth-quarter earnings call.

Twitter(NYSE:TWTR) demonstrated more strong momentum in its fourth quarter, reporting strong top- and bottom-line growth and a nice uptick in daily users. Specifically, revenue increased 24% year over year to a record $909 million, and net income surged from $91 million in the year-ago quarter to $255 million. Meanwhile, the company's monetizable daily active users grew 9% year over year.

But what's behind this growth? Further, what does management think about Twitter's prospects going forward? To get a better understanding of the dynamics driving Twitter's business and management's view of its business, investors can turn to the company's most recent earnings call.

During the call, management discussed a range of topics. Here are three key quotes, including a look at a major catalyst for the company, a product change management is excited about, and how to think about daily active user growth.

Image source: Getty Images.

Video ads: A major catalyst for Twitter

The video ad format has been a major driver for digital advertising across social networks, including Facebook, Snapchat, and YouTube. Twitter is no exception to this trend.

Twitter CFO Ned Segal explained:

The video website card and the video app card continue to bring incremental dollars to Twitter as well as replacing where dollars might have been going before with a more compelling format and hopefully delivered in a more relevant way to a growing and more engaged audience. As a result of those is that we get better click-through rates. Click-through rates were up 27% this quarter.

The importance of video ads to Twitter can't be overstated. Not only is it the company's fastest-growing ad format, but video accounted for over half of the company's revenue during both the fourth quarter and the full year of 2018.

Improving conversations

When asked about upcoming product changes he's most excited about, Twitter CEO Jack Dorsey named three areas on the consumer side of the social network: platform health improvements, making conversations more fluid, and making it easier for users to follow their interests.

"We believe [conversation] is our core differentiator," Dorsey explained. "People come to Twitter not only to see what's happening, but what people think about what's happening, what people are talking about."

Dorsey expects there's significant room for improvement in this area:

And right now, the experience of having a conversation on Twitter is pretty difficult. There's a lot of friction within it. It's very hard to follow conversations. It's very hard to participate in them. We think there's a ton of opportunity to make that much, much faster. And we believe that this will generate even more conversations.

Expect more growth in monetizable daily active users

Twitter's growth in daily active users, or monetizable daily active users (mDAU), as the company now calls them, has been encouraging recently. Twitter's daily active users increased from 115 million at the end of 2017 to 126 million at the end of 2018. Given that monthly active users decreased from 330 million to 321 million over the same time frame, this highlights a sharp increase in user engagement on the platform.

But can Twitter keep growing its MDAU? When asked about what to expect from the metric, Segal sounded optimistic: "On mDAU growth and how it might evolve over the course of the year, we're not going to guide to how mDAU is going to grow. But we do think that the product changes that Jack has talked about and the events that go on in the world at any given time, they ought to cause DAU to continue to grow."

Of course, a closer look at Twitter's mDAU growth helps support the case for more strong growth in the metric. Growth in mDAU has been broad based across geographies, with five out of 10 of Twitter's top global markets seeing double-digit year-over-year growth in the key metric in Q4.

Author

Daniel Sparks is a senior technology specialist at The Motley Fool. He served in the U.S. Army on active duty and graduated with an MBA from Colorado State University. Follow him on Twitter for updates.
Follow @danielsparks